Greek unions and employers reject wage cuts

Feb 3, 2012, 17:27 GMT

Athens/Brussels - Unions and employers' associations in Greece rejected demands for private-sector wage cuts on Friday, as international lenders were demanding additional austerity measures in return for a second bailout package.

In a letter to the government, the trade unions and employers said they objected to proposals for the minimum wage to be slashed as well as cutting holiday bonuses in the private sector.

They said that, while they agreed not to further reduce workers' salaries, they would consider imposing a freeze on wages over the next three years.

Athens has yet to reach a key agreement with the European Commission, the International Monetary Fund (IMF) and the European Central Bank, known as the troika, over a rescue package worth at least 130 billion euros (170 billion dollars).

In return for the support, the troika is demanding finalization of parallel talks between Greece and private lenders on a 100-billion-euro debt write-off, and continued tough economic reforms including wages and pension cuts, as well as bank recapitalizations.

Greece needs to secure a deal on a fresh international bailout before March 20, when it will need to pay back 14.5 billion euros of maturing debt.

In Brussels, officials signalled that eurozone finance ministers would only meet after the Greek government closed the debt write-off deal with banks. Negotiators have been saying for days that they are on the brink of an agreement.

The head of the so-called Eurogroup, Luxembourg Prime Minister Jean-Claude Juncker, said ministers would not meet on Monday - dispelling widespread rumours - but added that 'a meeting may be scheduled later in the week.'

Several EU sources have indicated that ministers would have to discuss expanding the bailout to 145 or 150 billion euros, due to Greece's worsened conditions since the size of the package was first decided in October.

A spokesman for EU Economy Commissioner Olli Rehn did not deny this - but insisted that the banks' own contribution to Greek rescue efforts needed to be defined first.

'Only then you can draw conclusions (like) do we need additional public sector involvement - yes (or) no, how much, who will put the money on the table,' Amadeu Altafaj said.

Eurozone governments would either have to shell out more money - politically taboo in Germany and other northern countries - or the European Central Bank would need to take a hit on some of the Greek bonds it has bought - something it is expected to resist.

Greek Prime Minister Lucas Papademos was expected Saturday to meet the parties supporting his government - the Socialist PASOK, the conservative New Democracy and the right-wing Popular Orthodox Rally (LAOS) - to win their backing for the additional austerity measures.

The Kathimerini daily reported Friday that all the three parties were not ready to accept all of the troika's demands.

On Wednesday the IMF representative in Athens, Poul Thomsen, told Kathimerini that foreign lenders should be 'more sensitive' in their demands and also recognize that Greece 'has done a lot.'

In Brussels, Altafaj rejected suggestions that Thomsen was criticizing the EU and said 'you cannot simply ignore' that Greece had failed to meet budget targets agreed under its first bailout and should 'catch up with them.'

'The commission is providing as much solidarity as it can ... we are not insensitive, on the contrary, we are working for a better future for the people of Greece,' he insisted.

Meanwhile, according to Greek finance ministry sources, the government is looking to plug a 4.2-billion-euro budget shortfall through defence spending cuts, merging state-backed entities and reducing health spending.